Pontiac dairy farmers are among those across the country watching closely as Canada continues trade talks with the United States ahead of a July 21 deadline. Some are worried about the fate of this country’s supply management system after President Donald Trump has once again flagged it as an issue.
At the end of June, in a post to Truth Social in which President Trump announced he would be ending all negotiations with Canada because of this country’s plans to implement a digital services tax, he also zeroed in on the supply management system as a sticking point in negotiations.
In response, Canada backed out on implementing its digital services tax, which was set to charge American tech giants like Amazon, Meta, and Apple billions of dollars for services sold in Canada, to appease the president and resume negotiations, leaving supply management untouched.
In previous trade talks, the Canadian government has vowed to protect the supply management system, which since the ‘70s has restricted the production of dairy, eggs and poultry to what Canadians are expected to consume, to guarantee Canadian farmers a stable market.
To this end, last month parliament passed the Bloc Québecois’ Bill C-202, designed to take Canada’s current supply management deal with the U.S. off the table during trade negotiations.
But now, some trade experts are saying that with supply management likely next in line as a target for Trump, this bill may not be enough to prevent the loosening of Canada’s long-standing tight rein on the dairy, egg, and poultry industries, as the two countries work to reach a trade deal.
But what is supply management, and what exactly is Trump’s beef with it? Here’s what you need to know.
A system worth protecting, say farmers
The supply management system works through three pillars: a quota system, which regulates supply; a minimum price, which regulates the price of the product; and high tariffs to eliminate foreign competition in the market.
“It’s a balanced approach to filling the Canadian need for production of milk and dairy products,” said Scott Judd, a dairy farmer in Clarendon whose family has been milking purebred holsteins since 1885.
He said when prices are predictable, it gives farmers the confidence to plan for the future. Whether it’s expanding their land, investing in the next generation, or growing their business, the price-stability it offers makes long-term business decisions possible.
Justin Alary, a fifth-generation dairy farmer at Ferme Stépido in Luskville, said while the supply management system can make it hard for producers to grow, as farm production is limited by quota, he still believes the industry is better off because of it, and hopes the government will protect it in the ongoing trade negotiations.
“If we’re paid a stable price, the store sells at a stable price. So there’s no big spikes or crashes,” he said, adding this ensures a stable price for both farmer and consumer.
Shawville dairy farmer Dave Ingalls is the Pontiac representative to the Outaouais-Laurentides regional council for the Quebec milk producers.
Unlike Judd and Alary, Ingalls was not born into dairy farming. He and his wife, Eline Van Der Veen, got their foot in the industry in 2014, starting with 24 kilograms of quota, thanks to support from the New Entrant Program. Since then, they have managed to more than double the size of their operation.
He said any compromise of the current system is unacceptable.
“If you’ve traded any [market share] away, then you’ve not held up your end of the deal in my opinion, but that’s just my two cents.”
Trump’s beef
Trump has repeatedly claimed that Canada’s supply management system charges U.S. farmers as much as 400 per cent on products sold to Canada.
This is inaccurate. Canada charges tariffs between 200 and about 300 per cent on U.S. dairy imports that exceed certain quotas, referred to as tariff rate quotas (TRQ), that are set by the Canada-U.S.-Mexico Agreement (CUSMA) – the trade deal negotiated by Trump to replace NAFTA in 2018.
This agreement saw Canada raise its tariff rate quota on a number of different dairy, poultry and egg products, opening the Canadian market to increased American imports.
These quotas allow a set amount of dairy products to be imported at a lower tariff rate, but according to the International Dairy Foods Association, the U.S. has never come close to exceeding its quota. As a result, U.S. exporters don’t often encounter the higher tariffs.
The U.S. argues the real issue lies in how Canada allocates TRQ access. Canada maintains several TRQs across different dairy, egg and poultry products. Importers must apply for permits to access these quotas. Under Canada’s permit-based system, most of the import licenses go to Canadian processors, rather than retailers or distributors.
This means American dairy producers can sell to companies that turn dairy products into goods you can buy on Canadian shelves, but struggle to get their products directly onto the shelves of Canadian retailers. As a result, the U.S. argues it hasn’t received the full market access it was promised under CUSMA.
Tyler McCann, the managing director of the Canadian Agri-Food Policy Institute, and also a Pontiac farmer, is among the Pontiac residents watching as trade talks evolve.
“One of the three pillars of supply management is border controls, and that limits the ability of other countries to export into our market,” McCann said. “Donald Trump is generally of the view that other countries should not put any barriers up to the U.S. exports.”
“It’s important to understand that while President Trump makes all sorts of crazy claims, the U.S. dairy industry is not asking for supply management to be torn down,” he added. “They just want more access to the [Canadian market].”
New bill offers no guarantees, say experts
In anticipation of Trump’s continued attacks on supply management, the Bloc Québecois tabled Bill C-202, which received royal assent on June 26.
The bill amends the Department of Foreign Affairs, Trade and Development Act to prevent the department’s minister from making “any commitment” that would increase the limit on tariff-free dairy, egg or poultry products the U.S. can sell to Canada, or reduce the tariffs on imports that exceed these limits.
Unlike the recently rescinded digital services tax bill, C-202 was written specifically to protect the supply management system in the face of trade negotiations.
“[T]he supply management provision is clearly meant to constrain treaty negotiations. The DST didn’t have that, which is an important difference,” said Philippe Lagassé, an expert on Canadian policymaking at Carleton University, in an email, explaining why he figures it is less vulnerable to being abandoned, like the DST was.
Fen Hampson, an expert on Canada’s foreign policy and international negotiations at Carleton University, said this bill should offer a piece of mind to Canadian dairy farmers, as it was passed through the House unanimously.
This, he said, makes it very politically risky for the prime minister to change course, as doing so would threaten his political credibility. But others say side stepping it is technically possible. Lagassé is among them.
“This law makes it harder to negotiate away supply management, but laws can always be changed,” he said. “The question is whether the law truly prevents negotiations from taking place over supply management. That’s unclear to me.”
Lagassé is concerned that the current bill has a loophole, as it does not explicitly bind the Crown which, by way of the Royal Prerogative, can exercise powers outside of restrictions explicitly defined by legislation, including in foreign affairs. Prime Minister Mark Carney could choose to exercise these powers, side stepping the constrictions that Bill C-202 enforces.
“I suspect the bill was left with ambiguity around the prerogative on purpose. If the BQ didn’t insist on binding the Crown, despite several warnings about it, that seems intentional,” Lagassé said.
McCann said one of his biggest concerns with this bill is that it may give dairy producers a false sense of security.
“Thinking that this is going to prevent the government from making concessions that are necessary to get the trade deal . . . I just don’t think that’s reasonable.”
Instead, he emphasized that what really matters is the government’s political will to uphold its promises.
“And I think the prime minister and the new government have been very clear that they are very staunchly defending supply management and that is ultimately what matters the most.”
Passed unanimously, but still divisive
Hampson said that despite the bill passing unanimously, it could be potentially divisive in this country.
The U.S. cannot legally force Canada to change its supply management system. However, it can respond in other ways, such as by raising tariffs on Canadian exports like beef and grain, sectors that are export-dependent.
“We’re talking about a trade dispute, should the Americans decide to retaliate, which would threaten literally billions of dollars in sales and thousands of Canadian jobs [in other sectors],” he said.
McCann elaborated on this nuance.
“I think it is challenging when much of the discussion often comes down to supply management as the trade issue in agriculture,” McCann said, noting there are often more complex dynamics at play when it comes to trade negotiations.
“There’s an increasing expectation that Canada is going to have more tariffs across more products. That is not because we may not be prepared to make concessions on supply management. That is because the U.S. wants to put more tariffs on more products,” he said.
The complexity, McCann noted, is that supply managed sectors favour a closed market, and those that are not supply managed favour an open one. He said the vast majority of Canadian farmers are in export-dependent systems, which need strong supply chains and market access to the U.S. .
“An important dynamic to understand is that this isn’t a negotiation inside of agriculture. This is a negotiation across the economy.”
Hampson is not convinced supply management will be the issue to grind all trade negotiations to a halt, however, but warns this likely won’t be the last time the issue is on the table.
“We shouldn’t be surprised if it comes back next year,” he said, with CUSMA renegotiations set for 2026.
Hampson and McCann both agree that CUSMA talks about supply management may focus on tweaking how TRQs are administered, which is all the American dairy industry is asking for, according to McCann.
“If what we agree to in a deal is changes to how TRQs are administered, the average [Canadian] dairy farmer is probably not going to notice any difference,” he said.
“I think often it’s portrayed as, if you do anything to supply management, the whole system is going to fall apart, and that’s just not true.”
“This is where the government has some discretion,” Hampson said, predicting that during future negotiations, giving American producers direct access to Canadian distributors may be a way to achieve a deal.
Although, McCann noted, there is always a level of unpredictability when it comes to the American president.
“What we don’t know is where President Trump may go that’s above and beyond what the U.S. dairy industry is asking for, above and beyond what members of his cabinet have been asking for. That’s a giant question mark.”
